Global life and health reinsurance provider Reinsurance Group of America (RGA) has posted third-quarter results marked by a dip in net income but achieved record performance in adjusted operating income.
The company reported net income available to shareholders of $156 million, or $2.33 per diluted share, down from $287 million, or $4.29 per diluted share, in the same period last year.
Adjusted operating income reached $242 million, or $3.62 per diluted share, compared to $372 million, or $5.57 per diluted share, year-over-year. Excluding notable items, adjusted operating income climbed to $410 million, or $6.13 per diluted share, a quarterly high.
Foreign currency exchange movements had a slight effect, reducing net income by $0.03 per diluted share but adding $0.02 to adjusted operating income per share when compared to the prior year.
The company reported a return on equity (ROE) of 7.7% for the quarter, with adjusted operating ROE at 13.8%. Excluding notable items, RGA's trailing 12-month adjusted operating ROE reached 15.5%, also setting a quarterly record.
RGA directed $382 million of capital toward in-force block transactions and noted a $4.6 billion, or 13.9%, increase in Value of In-force Business Margins in the first nine months of 2023.
In individual life markets, RGA plans to increase its per-life retention limit, effective Jan. 1, 2025, the first change since 2008. RGA attributes this decision to significant growth and diversification in its business, which has enhanced its capacity to manage earnings volatility from claims. The shift aligns with the newly adopted Long-Duration Targeted Improvements (LDTI) accounting standard, which spreads earnings volatility across the business’ lifespan.
RGA expects this update to result in recapturing previously retroceded business starting in 2025, impacting the third-quarter consolidated pre-tax adjusted operating income by an unfavorable $136 million. However, the adjustment favorably affects Value of In-force Business Margins by $1.5 billion, anticipated to accrue over the business's remaining duration. RGA projects a positive influence on run-rates beginning in 2025, with a gradual increase over time.
RGA also conducted its annual actuarial assumption review, resulting in a $58 million unfavorable effect on consolidated pre-tax adjusted operating income, largely due to revised lapse rate assumptions in its term business in India, though partially balanced by mortality improvements in the US and Canada.
This adjustment is expected to provide a $0.1 billion favorable impact on Value of In-force Business Margins over the life of the business.
RGA’s president and chief executive officer, Tony Cheng (pictured right), noted that the quarter's results demonstrate strong performance across various segments. Cheng stated that the Asia Traditional and Financial Solutions businesses yielded positive outcomes, and the US Traditional and EMEA regions showed solid performance.
“Our balance sheet remains strong, and we ended the quarter with excess capital of approximately $0.7 billion. Based on favorable business conditions and RGA’s global leadership position, we are optimistic about the future and expect to continue to deliver attractive financial results over time,” he said.
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